Disposable packaging tax in the city of Tübingen
In an order published today, the First Senate of the Federal Constitutional Court rejected a constitutional complaint challenging the Bylaws of the City of Tübingen Introducing a Disposable Packaging Tax (Packaging Tax Bylaws, Verpackungssteuersatzung).
Since 1 January 2022, the city of Tübingen has been levying a tax on the use of disposable packaging and tableware under its Packaging Tax Bylaws. The tax applies insofar as food and drink sold for immediate consumption on the premises or as take away food or drink come with such disposable products. Retailers of such food and drink are liable for the tax.
The complainant operated a fast food restaurant in the city of Tübingen. The complainant lodged an application for judicial review challenging the taxation of the consumption of single-use products; the application was for the most part rejected by the Federal Administrative Court (Bundesverwaltungsgericht) in its judgment of 24 May 2023.
The constitutional complaint challenging this decision was unsuccessful. In particular, the disposable packaging tax constitutes a ‘local’ tax on consumption within the meaning of Art. 105(2a) first sentence of the Basic Law (Grundgesetz – GG), including insofar as the consumption of single-use products is taxed when ‘take away food or drink’ are concerned. The purpose pursued – incentivising reusable packaging – does not run counter to concepts of federal waste legislation that have been relevant since the entry into force of the Packaging Tax Bylaws.
Facts of the case:
Since 1 January 2022, the city of Tübingen has been levying a tax on the use of disposable packaging and tableware under the Packaging Tax Bylaws. The tax applies insofar as food and drink sold for immediate consumption on the premises or as take away food or drink come with such disposable products. Retailers of such food and drink are liable for the tax.
The complainant operated a fast food restaurant in Tübingen. Following the complainant’s application for judicial review, the Baden-Württemberg Higher Administrative Court (Verwaltungsgerichtshof), by judgment of 29 March 2022, declared the Packaging Tax Bylaws to be invalid. It held that the disposable products used for the sale of ‘take away food or drink’ did not qualify as products for ‘local’ consumption within the meaning of Art. 105(2a) first sentence of the Basic Law, and that the city of Tübingen thus lacked the requisite legislative competence. The Court declared that this led to the bylaws being invalid in their entirety.
By judgment of 24 May 2023, the Federal Administrative Court amended the judgment of the Higher Administrative Court and rejected the application for judicial review for the most part. It held that, when reasonably construed, the statutory design of the tax guaranteed that the consumption was local, as constitutionally required, including insofar as liability for the tax was based on the sale of food and drink ‘as take away’. The Court further held that the packaging tax was also compatible with retailers’ freedom to practice an occupation protected by Art. 12(1) of the Basic Law.
The complainant challenges this decision by constitutional complaint.
Key considerations of the Senate:
The constitutional complaint is admissible but unfounded. The levying of the disposable packaging tax, which is designed as an incentive tax, interferes with retailers’ occupational freedom under Art. 12(1) of the Basic Law. However, this interference is formally and substantively constitutional.
I. The city of Tübingen could base the Packaging Tax Bylaws on the competence of the Länder to legislate with regard to local taxes on consumption under Art. 105(2a) first sentence of the Basic Law and § 9(4) of the Baden-Württemberg Municipal Levies Act (Kommunalabgabengesetz Baden-Württemberg). In particular, the disposable packaging tax is a ‘local’ tax on consumption within the meaning of Art. 105(2a) first sentence of the Basic Law.
1. Pursuant to § 1(1) first alternative of the Packaging Tax Bylaws, liability for the tax is based on the supply of single-use products for the sale of food and drink ‘for immediate consumption’; in this regard, the criterion that consumption must be local is readily met, as is necessary under constitutional law. While it is not ruled out that, in atypical cases, food and drink may be consumed away from the point of sale and outside the municipality, such atypical conduct does not call into question that the criterion of selling ‘for direct consumption’ covers the typical case of local consumption.
2. a) Goods that are not intended for ‘direct consumption’ can still be local if they are typically consumed in the municipality. This can be indicated by the properties of the goods; other factors that must be taken into account include the municipality’s supply structure or size. Liability for such a tax requires that the legislation lists the goods that are typically consumed within the municipality following their sale, or specific criteria based on which such goods can be determined; the legislative authority has a margin of appreciation in this regard.
b) On this basis, the liability for the tax meets the criterion of ‘local’ as it is tied to the supply of single-use products for the sale of ‘take away food and drink’ under § 1(1) second alternative of the Packaging Tax Bylaws. The Federal Administrative Court interpreted the provision in conformity with the Constitution, to the effect that the tax is only payable when single-use products are supplied for food and drink that are typically consumed directly after purchase, because their temperature, texture and freshness, which are decisive for their quality, are negatively impacted after even a short amount of time. The complainant did not admissibly challenge this interpretation. Based on these criteria, the ‘take away food and drink’ that comes with single-use products, resulting in liability for the tax, can be determined with sufficient certainty. It is not objectionable under constitutional law that the Federal Administrative Court, at least implicitly, assumed, based on the facts established by the Baden-Württemberg Higher Administrative Court, that the criteria set out in the bylaws realistically reflect the local nature of the tax. The Higher Administrative Court assumed that the ‘quick’ consumption of take away food and drink most frequently occurred within city limits. The complainant did not submit sufficiently specific evidence that could disprove this assumption.
II. The disposable packaging tax in the city of Tübingen is not in breach of any limitations derived from the principle that the legal order be free of inner contradictions or from the principle of loyalty within the federal order (Bundestreue).
1. Under the principle that the legal order be free of inner contradictions, which is derived from the rule of law, the exercise of the legislative competence with regard to taxes designed to create incentives in an area governed by substantive law is only permissible if this does not lead to contradictions within the legal order.
There is no need to determine the scope or specific significance of the principle that the legal order be free of inner contradictions in its manifestation as a limitation on the legislative competence for taxation to create incentives in an area governed by substantive law. The incentives that the disposable packaging tax intends to create do not run counter to the overall concept or individual provisions of federal waste legislation that has been applicable since the entry into force of the Packaging Tax Bylaws on 1 January 2022.
2. Nor is the disposable packaging tax precluded by the levy on single-use plastics under § 12 of the Act on the Fund to Address the Negative Impacts of Single-Use Plastics (Einwegkunststofffondsgesetz) in light of the principle of loyalty within the federal order in its manifestation as a limitation on the exercise of legislative competences. This is because the packaging tax does not deprive the Fund to Address the Negative Impacts of Single-Use Plastics of its financial basis.
III. There are no indications that the disposable packaging tax in the city of Tübingen, which is suitable and necessary to generate revenue, results in unreasonable impairments to occupational freedom protected by Art. 12(1) of the Basic Law. There is no evidence that the effects of the packaging tax result in businesses with average profits in the city of Tübingen having to close. In the constitutional complaint proceedings, no evidence was submitted that there was an increase in the closure of affected businesses following the entry into force of the Packaging Tax Bylaws.
The interference with retailers’ occupational freedom resulting from the fact that retailers must collect the tax is also proportionate. This is a suitable and necessary means to be able to collect the packaging tax. The less restrictive alternative of basing liability for the tax directly on the consumption of single-use products by consumers, rather than indirectly basing it on their sale, would not be feasible and is therefore no equally suitable means to achieve the aims pursued.